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Pure Gym Financial Analyses

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Abstract
Health professionals advise individuals to exercise regularly to increase their health-related quality of life and prevent various lifestyle associated diseases. Hence, fitness establishments have been rising to prominence. The Pure Gym chain of fitness centers aims to provide high-quality services at a very low cost all over the UK. Approximately 14.9% of the UK population is registered to a fitness facility. In March 2017, the group had reported a 28% revenue growth since December 2016. The gym membership grew with approximately 152000 new enrollments that year. The continued registration has enabled pure gym centers to make high profits that other groups are yet to get. In 2017, the gym experienced financial difficulties associated with the Brexit vote according to the administration. Another financial challenge is the fact that people opt to establish cheaper exercise habits than going to the gym. One of the means of fostering loyalty is offering incentives to people who are renewing membership.
Keywords: pure gym, fitness, registration, revenue growth, financial difficulties, incentives.

Introduction
Physical exercise has been established as a significant determinant of individual health status. Shifting of diets towards more processed foods with too much sugar has caused drastic rises in average weight of people. Many health professionals advise individuals to exercise regularly to increase their health-related quality of life and prevent various lifestyle associated diseases such as obesity, high blood pressure, and diabetes.

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As a result, fitness establishments have been rising to prominence. The initial gyms in the United Kingdom were charging a relatively high amount. This is despite the fact that most lacked the high-tech equipment found in similarly priced fitness facilities around the globe. The Pure Gym chain of fitness centers was established to cater for these two problems. It aimed to provide high-quality services at a very low cost all over the UK.
Headquartered in Leeds, Pure Gym was established in 2009 by Peter Roberts (Cave, 2015, n.p). In its infancy, it operated in four areas which were Leeds, Edinburgh, Wolver Hampton, and Manchester (Cave, 2015, n.p). Roberts cites visits to the USA, Germany, and Scandinavia and motivating factors to start these facilities (Cave, 2015, n.p). The facilities charge less than $20 every month, and members do not make a long-term engagement promise. Upon online registration, the members can access the facilities through codes anywhere within the UK. Pure Gyms has grown to have 189 sites by the end of 2017. It has a registration of over 950000 members in the UK (Woods, 2017, n.p). In November 2017, the PureGym was sold to Leonard Green & Partners fund for 600 million euros (Woods, 2017, n.p). This move came about one year after it delayed its initial public offer citing poor economic conditions as a result of the Brexit vote (Moore, 2016, n.p).
Financial Analyses
On 15th January 2018, the gym was awarded CFR B3 points on the Moody’s Investors Service scale. When it closed the year, the company still had an undrawn pro-forma of 1 million pounds. This was contributed to by LGP and management contributions of up to 292 million pounds. According to the Moody’s Investors Service, the investor’s loans will be repaid within one month. It is expected to grow at 1% in 2018 and a further 1.7% in 2019. By all means, the prospects for the company are, therefore, positive, and investors are confident about the company.
Growth
In March 2017, PureGym reported strong financial outcomes for the year ending December 2016. The group had reported a 28% revenue growth (Pure Gym continues rapid expansion as clear UK industry leader, 2017, n.p). The table below represents various results for 2016.
Result 2016 2015 Change
Revenue (£’000) 159,937 125,201 28%
Group EBITDA2 (£’000) 39,524 27989 41%
Gyms (trading as Pure Gym) 170 1332 29%
Gyms (trading as LAX / LA Fitness)3 2 21 Members 822,000 670,000 23%
The gym membership grew with approximately 152000 new enrollments that year. More 30% of these have never had a gym membership before (Pamben, 2017, n.p). This is an indication that the facility is indeed serving a particular clientele that was not tapped by previous gym models. Its flexible, low-cost facilities are a welcome improvement to previous plans. The revenue grew by 28%. 41% growth in EBITDA was beyond the expected value by the administrators (Pure Gym continues rapid expansion as clear UK industry leader, 2017, n.p). In that year, the 18 sites had been shut down temporarily to convert them into full-fledged gyms. If these sites had been opened, the registration would have been higher.
Market Share
Approximately 14.9% of the UK population is registered to a fitness facility. This translates to about 9.7 million people (Quesnel, 2017, n.p). With a membership of 950000, the Pure Gym facility has about 10% of the market share. This is an impressive share for a facility that is only eight years old. With the continued registration of individuals who have never been enrolled in other facilities, the facility is positioning itself in a niche where other facilities have not ventured. This is a positive move since most of the upper segment is saturated.
Profitability
In 2017, the gym experienced financial difficulties associated with the Brexit vote according to the administration. This led to the postponement of the IPO. To boost investments, a significant value of the gym was sold off to a US-based fitness enterprise. After the sale, the founder would cease being part of the shareholders. This might be a sign of financial struggle within the company. The company was sold for 600 million euros. One of the reasons for the financial challenges is the fact that it is easier for people to establish cheaper exercise habits than going to the gym such as track jogging. This can be a particular problem for low-cost fitness centers where commitment levels are low.
Recommendations
Although it is essential to provide a low-cost and flexible alternative to previous costly models, the gym must aim to increase loyalty among the new enrollees. When the registration cost is low, there is a risk of individuals enrolling but falling out of the program soon afterward. This way, the company will show impressive numbers, but they will not reflect figures. One of the means of fostering loyalty is offering incentives to people who are renewing membership or those who have stayed for a particular time with an active membership.
Limitations
The main limitation of this article is that it relies on data for the 2016 year. The facility releases its financial results in March. The results for 2017 are therefore not available. With the fact that the company was sold in November 2017, their factors that led to the sale, as well as the impacts of this transfer, are not readily available. This report will be more accurate if it accounts for the results of the last year.

References
Cave, A. (2015). Pure Gym founder on how he built Britain’s biggest gym chain. [online] Telegraph.co.uk. Available at: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11337645/Pure-Gym-founder-on-how-he-built-Britains-biggest-gym-chain.html [Accessed 12 Jan. 2018].
Moore, J. (2016). Pure Gym pulls London float. Have low-cost gyms run out of puff? [online] The Independent. Available at: http://www.independent.co.uk/news/business/comment/pure-gym-pulls-london-float-have-low-cost-gyms-run-out-of-puff-a7355316.html [Accessed 12 Jan. 2018].
Pamben, D. (2017). Surging membership numbers boost Pure Gym figures. [online] Healthclubmanagement.co.uk. Available at: http://www.healthclubmanagement.co.uk/health-club-management-news/Pure-gym-Financials/331235 [Accessed 12 Jan. 2018].
Pure Gym continues rapid expansion as clear UK industry leader. (2017 n.p). Leeds: PureGym.
Quesnel, C. (2017). 2017 STATE OF THE UK FITNESS INDUSTRY REPORT – OUT TODAY. [online] The Leisure Database Company. Available at: http://www.leisuredb.com/blog/2017/5/5/2017-state-of-the-uk-fitness-industry-report-out-now [Accessed 12 Jan. 2018].
Woods, B. (2017). The joint owner of Topshop has just taken over Britain’s biggest gym chain. [online] The Independent. Available at: http://www.independent.co.uk/news/business/news/puregym-sale-bought-topshop-joint-owner-leonard-green-a8035951.html [Accessed 12 Jan. 2018].

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